S&P trims Zagrebacki

S&P said it lowered Zagrebacki Holding doo’s issuer rating to B- from B+, following the downgrade of its owner, the city of Zagreb to BB- from BB.

“The city of Zagreb's ability to support ZHG has diminished significantly. This is a consequence of the city's Covid-19-related shortfalls in tax revenue and additional reconstruction costs following the March earthquakes. Furthermore, we consider Zagreb's liquidity as weak given the little cash available and limited access to capital markets,” S&P said in a press release.

The agency said it forecasts S&P Global Ratings-adjusted EBITDA of about Croatian kuna (HRK) 165 million in 2020, down from HRK 401 million in 2019, translating into funds from operations (FFO) to debt of 0.7%, down from 7.5% in 2019.

“However, we expect ZGH's EBITDA will recover to 2019 levels by 2021, with S&P Global Ratings-adjusted FFO to debt reaching 5%-10% thanks to stabilizing operating conditions, gas supply market liberalization, and proposed waste tariff increases,” S&P said.

The outlook is stable.

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